Kraft Explains Its Decision to Charge for Its IPhone App
Five Questions With Director-Innovation Ed Kaczmarek
NEW YORK (AdAge.com) -- To charge or not to charge. That's the question many marketers and media companies building mobile apps are asking themselves. Kraft, which has arguably been one of the more successful
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| PLAY VIDEO: Brief demonstration of Kraft's iFood app. |
Last week at the Ad Age and Appolicious Apps for Brands conference, we caught up with Ed Kaczmarek, director of innovation-new services at Kraft Foods, to ask how the markketer came up with the decision to charge -- and why this iPhone app is so important for Kraft and its future business model.
Ad Age: What was your thought process around whether to charge for your app?
Mr. Kaczmarek: We look at iFood Assistant as a natural evolution from product to service. We look at it as providing the consumer with a service that's of value, and we feel the 99 cent price, which is the same as a song, is a minimal cost, but it also signifies the content is more premium. We do have content on iFood Assistant that isn't available on free platforms, and we're also pulling it into the application in an easier, more delicious way. It also means a person can take their recipe box and shopping list with them -- the same one they save on their desktop.
I think it's important that the whole evolution of free and paid is also testing and learning. As we set out, it's very difficult to go from free to paid, but if it doesn't work, you can always go from paid to free. But we've found it does work. We feel good that we're giving an extremely good value to the consumer. And I think our results are proving that.
Ad Age: You view the App Store as a platform that you can use to sell other services as well. Tell me about that.
Ad Age: And if you're a free app, you can't exactly do that -- right?
Mr. Kaczmarek: A free app currently does not allow in-app commerce. And I think that factor just reinforces [that] we made the right decision, even though there are definitely skeptics. But any time you jump ahead of the curve, there will always be people who disagree with it.
Ad Age: You also promote Kraft products in your app. Have you gotten backlash from users who say "We paid for this -- I don't want to see an ad in it"?
Mr. Kaczmarek: I think you're always going to see that. If you go through the App Store comments, which are available on iTunes, there are definitely some consumers, though not a lot, who make the comment that "If I'm paying 99 cents I want a free app." But there are also consumers that will defend you. One consumer wrote in a comment, "Oh stop it -- the app is from Kraft, it's worth well more than 99 cents." So I think you have your yin and yang, where some consumers will keep others honest and say, "Hey, this is a great value for 99 cents," and we feel really good about that.
Ad Age: You have talked about where you are now and where you want to get to. Tell me about that.
Mr. Kaczmarek: Our goal is to continually jump ahead of the curve. We're testing and learning so when smartphone adoption triples, we will have evolved iFood Assistant to the point where it will truly be indispensable. With innovation we try to stay two or three years out, but the adoption of the iPhone is quickening the pace at which consumers adopt this kind of content. It's a mini computer, and it's so dynamic. And it allows us to put delicious at your fingertips.
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They can rationalize it all they want, but the majority of people out there aren't going to care (or will be turned off) that the reason they had to pony up a buck for the app is because Kraft wants the option to charge them for more content later.
Feel like I am watching "Dumb and Dumber marketing" again as I discussed in my blog: http://nosmokeandmirrors.wordpress.com/2009/08/15/dumb-and-dumber-fox-and-warner-and-how-they-are-planning-on-delaying-deliveries-to-red-box/
When market leaders act inside out, they become market losers.
Good news is they can always change their mind...however the longer it takes the more you lose.
Mark Allen Roberts
www.outbsolutions.com
Of course if they donated the profits to a feed the children type charity, it would clear up any doubt.
This does not make sense to me. Maybe they have such great brand loyalty, that people can't wait to give them a buck. I am amazed at the Apps that people actually purchase, but usually those are more entertaining. Is the iPhone user really that interested in making that Kraft stuffed processed turkey roll? Mmmm.
Bob Hoot
Hoot Communications
What makes me curious is why we look for deeper meaning and an explanation or rationalization for paid or unpaid activity on the web while discounting what all of us do in general. How many of us at one time or another have bought a booklet, a video, a magazine, or any other offering that provided a self help or educational tool that appealed to us?
The one constant that is true is that whomever it is that creates content can post it for free or charge for it and we the public vote by how we respond.
To anyone that has read this post - thanks